He Ryde And Rowe Inc. Had The Following Account Balances

He Ryde And Rowe Inc Had The Following Account Balances As Of January

He Ryde and Rowe Inc. had the following account balances as of January 1: Direct Materials Inventory $8,700, Work in Process Inventory $76,500, Finished Goods Inventory $53,000, Manufacturing Overhead $0. During January, various costs and transactions occurred including purchases of direct and indirect materials, labor costs, manufacturing costs, and sales activities. The company assigned manufacturing overhead of $34,400. The task is to determine the ending balances in the Direct Materials, Work in Process, and Finished Goods Inventory accounts at the end of January based on the provided information, including the applied manufacturing overhead.

Paper For Above instruction

In manufacturing accounting, the accurate calculation of inventory balances is critical for assessing a company’s production costs, inventory valuation, and profitability. For He Ryde and Rowe Inc., starting with initial account balances and considering the incurred costs and transaction activities in January, including the allocation of manufacturing overhead, provides a comprehensive picture of work-in-process and inventory status at month-end.

Initial Balances and Assumptions

The initial balances as of January 1 are given: Direct Materials Inventory at $8,700, Work in Process Inventory at $76,500, and Finished Goods Inventory at $53,000. Manufacturing Overhead starts at zero, and the company plans to apply a total overhead of $34,400 for January. The company incurred costs including purchases of direct and indirect materials, labor costs, and various factory and selling expenses, alongside the transfer of completed goods to the finished goods inventory and eventual sale.

Analysis of Transactions and Cost Flows

During January, direct materials costing $29,000 were purchased, with $5,000 of indirect materials also acquired. The company used $22,000 worth of direct materials in production, indicating a movement of materials from inventory to Work in Process (WIP). Direct labor costs totaled $44,000, incurred over 1,800 hours, representing inputs into the manufacturing process.

The manufacturing overhead pool was assigned a total of $34,400, which was to be applied to WIP based on predetermined rates. Since no specific basis (such as labor hours or machine hours) is provided for overhead application, we will assume the entire amount was applied directly to WIP, reflecting the standard manufacturing overhead rate.

Calculation of Ending Inventory Balances

Direct Materials Inventory

The initial inventory was $8,700. Purchases added $29,000, and direct materials used in production amounted to $22,000. Hence, the ending balance in direct materials inventory is calculated as:

Beginning direct materials inventory + Purchases - Materials used = Ending direct materials inventory

$8,700 + $29,000 - $22,000 = $15,700

Work in Process (WIP) Inventory

The initial WIP inventory was $76,500. Direct materials of $22,000 were added, along with direct labor costs of $44,000. Applying the full manufacturing overhead of $34,400, total manufacturing costs added to WIP during January are:

• Direct materials: $22,000
• Direct labor: $44,000
• Manufacturing overhead applied: $34,400

Total manufacturing costs added to WIP:

$22,000 + $44,000 + $34,400 = $100,400

Assuming all these costs are added and the transfer of completed goods occurs, the ending WIP inventory will reflect any remaining work not transferred out. Since equipment valued at $69,000 was transferred to finished goods, it indicates that this amount was completed and moved. To determine the ending WIP, we subtract the transferred amount from total costs and add the beginning inventory:

Beginning WIP + Manufacturing costs added - Transfer to Finished Goods = Ending WIP Inventory

$76,500 + $100,400 - $69,000 = $107,900

Finished Goods Inventory

The initial finished goods inventory was $53,000. With equipment worth $69,000—representing goods transferred from WIP to finished goods—the finished goods inventory is adjusted accordingly. The transfer of goods worth $69,000 increases the finished goods inventory. The sale of goods worth $88,427 for $160,777 affects the inventory and revenue but does not affect the calculation of ending balances directly in terms of inventory valuation at month-end. Therefore, the ending Finished Goods inventory will be:

Initial Finished Goods + Transfer from WIP - Cost of Goods Sold (assumed to be transferred out) = Ending Finished Goods Inventory

$53,000 + $69,000 - $69,000 = $53,000

Final Inventory Balances

• Direct Materials Inventory: $15,700
• Work in Process Inventory: $107,900
• Finished Goods Inventory: $53,000

Conclusion

The calculations illustrate how initial balances and costs incurred influence the ending inventories in manufacturing settings. Accurate application and transfer of manufacturing costs ensure proper inventory valuation and reflect true production activity. Notably, the substantial transfer of goods totaling $69,000 from WIP to finished goods indicates active production and progress towards sales, with inventory adjustments corresponding accordingly.

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